One of the biggest challenges faced by entrepreneurs especially in the small businesses sector is raising enough funds to launch start-ups, drive new ventures and fuel business growth. Luckily, even with little or no assets, businesses owners have several viable funding options, from unsecured business loans to crowdfunding. Here is a look at the top five ways in which a business can source its funds.
- Personal funding
Personal funding is often needed in the early stages of a start-up of a new venture. To prove the business concept or idea to prospective funders, you may need a product prototype, working business model or presentable research figures, which cost money. You can tap into your personal savings, take out a second mortgage on your house or use your credit card to raise business funds.
- Friends and family
If you don’t have enough personal funds to start or grow your business, consider inviting your family and close friends to contribute. Friends and family would be eager to invest in you if they see potential in your venture or appreciate your efforts. Some of them would never expect their money back or would consider it a personal grant or soft loan. Although the idea is not to seem as though you are begging for money or asking for handouts, put together a professional presentation and pitch for the request, treat them as you would real investors. It may surprise you just how much financial support you can get from your loved ones.
- Businesses loans
Financial institutions like banks have generous credit facilities designed to fund businesses. Nowadays, business loans are flexible to attract a variety of borrowers with diverse business structures. The lenders can offer you either a secured loan, where business assets serve as loan collateral or an unsecured business loan, where the lender assesses the business’ turnover to determine its ability to pay the loan. With a well-drafted business plan and realistic expectations, it is relatively easy to qualify for a business loan.
- Angel investor
As your business grows at a steady, predictable rate, it is time to seek out investors to take it to the next level. It is difficult to engage an investor during start-up without any real figures and market experience, but some businesses, especially in the tech industry, are unique and promising enough to get investors interested from the very start.
Angel groups can be found online and in most business communities. If your business meets their requirements, the investors can set up meetings to discuss the opportunity. The amount that an investor contributes towards the business varies depending on what the investor looks to gain from the business, the reason for funding, and the overall business prospects.
- Crowdfunding
Crowdfunding has increasingly become popular over the last few years as indicated by the crop up of numerous online crowdfunding platforms. These platforms have different regulation and rules, but they all expose start-ups and small businesses to a vast pool of small investors willing to give away a little bit of cash to see an idea realised.
It may seem like an unorthodox method of raising funds, but it actually works. Crowdfunding is ideal for funding small unique projects. Besides just funding, it gives you an insight into how the public responds to your business idea, project or product.